Abstract

The objective of this study is to understand what factors influence the security of physical
distribution networks. Thereafter it aims to bring to light what security measures exist today to
enhance security and finally how to determine the profitability of security investments.<br>
Eight stakeholders affecting security in physical distribution networks are identified and
combined into a Physical Distribution Security System (PDSS): the law enforcement agency,
transport and distribution operators, business security certifications, insurance companies,
security providers, cargo criminals, contract regulatory associations and authority. The actions of
these actors on security are formulated in terms of 19 hypotheses in which factors as criminal
prosecution, law enforcement agencies resource allocation, willingness to pay for security,
impact of business and authority security certifications, premium discounts etc., are put into
relation with the security of distribution companies. The tenability of the hypotheses is tested by
means of a survey study sent to 577 physical carriers based in Sweden. By means of multivariate
statistical techniques, 9 of the 19 hypotheses are rejected determining the exclusion from the
PDSS of the business and authority certifications (AEO). The hypotheses that were considered
tenable confirm the following factors as significantly affecting the magnitude of security
investments as well as the number of security incidents:<br>
• Prosecution of criminals.<br>
• Law enforcement agency resource allocation.<br>
• Collaborative activities.<br>
• Just in Time (the Just in Time mindset of transportation companies).<br>
• Premium discounts.<br>
• Uncertainty of security prototypes.<br>
• The criminals’ opportunistic behavior.<br>
• Security requirements agreements.<br>
• Contract complexity.<br>
• Risk sharing.<br>
Examining previous research we found that many of these factors are still unknown to the supply
chain and logistics academic field (prosecution of criminals, resource allocation, collaborative
activities, uncertainty of security prototypes, contract complexity). Other factors as the
specification of security requirements in contract agreements, JIT and the cargo criminals’
behaviors are confirmed. Other as the length of distribution networks, conflicts with logistics
performance and willingness to pay are rejected. Finally the role of the authority is also
mentioned in previous research. However this study doesn’t show significant relationships with
the security of transportation companies. In particular, the findings reveal that transportation
companies in Sweden that are AEO compliant have higher security budget but still a higher
number of security incidents.<br>
To facilitate the choice of security measures and determine their impact on security threats, this
study proposes two approaches: a multi-layered logistics framework and an investment model
based on experts’ judgments, quantitative risk assessment and Reliability Block Diagram
techniques. The multi-layered logistics framework describes supply chains as split into six layers
where security measures may be applied. The framework may be used by managers to
qualitatively identify weak spots and related countermeasures in supply chains. Finally,
quantitative risk assessment combined with Reliability Block Diagrams and Monte Carlo
techniques are exploited to give an example of how to compare costs and benefits, in the form of
risk reductions, of technical security systems for road transport operations (i.e. GPS, RFID, eseals
etc.) against cargo theft.